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Hello sir..
If proceeds reinvested in depriciating asset
Then deffered is postponed to the earlist of:
1.disposal of new asset
2.the date the new assest ceases to be used in the trade
3.10 years after the new asset was accquired..
In above paragraph im find dificulty to understand the point no 2.. Can u plz explain the point no 2..
Thanks..For example, Company A has a warehouse that is used to store finished goods. The warehouse is sold and the proceeds are reinvested in some machinery which is used for production.
After, say, 2 years, the company buys a new machinery which is an upgrade over the old machinery. Due to this, the old machinery ceases to be used and it is simply kept at premises to be sold afterwards.The date at which this old machinery ceases to be used for production is the date when its business use is stopped. Hence the gain is crystallised.
The depreciating asset will be either fixed plant and machinery as f6ali refers above or a leasehold building where the lease acquired is less than 60 years – then within 10 years of acquisition the building ceases to be used in the trade and is instead let to another business from which rental income is received
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